Typically, when a potential borrower plans to take out a loan, for example, in purchasing a home, the borrower may consult lenders such as banks, credit unions, mortgage companies, government housing agencies, etc., in order to obtain the funds necessary to purchase the home. These lenders typically offer a series of loan products to potential borrowers. In making a loan, the lender is committing to provide funds to the borrower based on the borrower's qualifications. In exchange for the loan, the borrower is committing to repay the loan funds by way of a series of loan payments. The lenders make loans to borrowers in the “primary mortgage market.”
Often, after making loans to borrowers in the primary mortgage market, lenders sell the loans to investors in the “secondary mortgage market.” Each loan may be sold alone, or in packages with other loans, for cash or in exchange for securities which provide lenders with a liquid asset to hold or sell to the secondary market. By selling its loans in the secondary mortgage market, a lender replenishes its supply of available funds, thereby providing it with more funds to make more loans to other borrowers.
Mortgage loans are typically viewed as comprising two separate components or assets: a loan asset and a servicing asset. The loan asset provides the secondary mortgage market investor with an interest in the loan payments, including principal and interest payments, made by the borrower pursuant to the loan. Thus, the investor receives a return on its investment by receiving the principal and interest payments made by the borrower.
The servicing asset also provides an interest in the payment stream associated with the loan. The servicing asset is typically owned by an entity, referred to as a servicer, that receives loan payments from the borrower and/or performs other servicing functions in connection with the loan. Typically, when the servicer receives the loan payments, the servicer retains a portion of the interest payment as a fee for servicing the loan. The servicing asset thus provides the servicer with the right to receive an income stream for servicing the loan.
When a loan is sold, the transaction is typically structured in one of several ways. According to one type of transaction, referred to as a whole loan sale or a servicing-released execution, the lender sells the entire loan (including both the loan asset and the servicing asset) to one entity. For example, the lender may sell the loan and servicing assets to an aggregator or wholesaler, which may turn around and sell the loan assets to investors in the capital markets and sell the servicing assets to servicers.
In another type of transaction, referred to as a co-issue sale or a servicing-retained execution, the lender sells the loan asset and retains the servicing asset. A lender that selects a servicing retained execution may decide to perform servicing of the loan itself or may decide to aggregate the servicing assets and sell the servicing assets in bulk to a servicer. Some lenders may wish to perform servicing internally because they can do so on a scale that is cost-effective. Some lenders may also decide to perform servicing internally in order to maintain a direct relationship with the borrower. Other lenders may decide to aggregate the servicing assets and sell the servicing assets in bulk to a servicer. Such lenders may consider it desirable to sell the servicing asset in order to avoid the need to support and manage the servicing assets. For example, in addition to receiving payments from borrowers, the lender must manage the volatility of the servicing asset and properly account for the servicing asset in its financial reporting.
A co-issue sale is operationally efficient because the loan asset is delivered directly to an investor and the servicing asset is delivered directly to a servicer. However, difficulty has been encountered because there is still a need for the lender to support and manage servicing assets during the time period in which servicing assets are being aggregated, i.e., after the loans have been made but before the servicing assets are sold in bulk to a servicer. Particularly for small to mid-size lenders, such as community-based lenders, the resources needed to support and manage servicing assets during this time period may drastically reduce the efficiencies that may otherwise be obtained through a co-issue sale.
Accordingly, there is a need for improved systems and methods that may be used to facilitate the sale of loans into the secondary mortgage market. There is also a need for systems and methods that may be used to facilitate the sale of loans into the secondary mortgage market using different types of transactions, including transactions involving the sale of servicing assets on a flow basis or in bulk. There is also a need for systems and methods that facilitate the sale of a loan into the secondary mortgage market, including the sale of servicing assets to one of multiple servicers, for example, through a brokered auction-like process. There is also a need for systems and methods that enable servicers to manage loan commitment pipelines comprising loans from multiple lenders through a network-based (e.g., Internet-based) user interface.
It would be desirable to provide systems and methods that provide one or more of these or other advantageous features as may be apparent to those reviewing this disclosure. The teachings disclosed extend to those embodiments which fall within the scope of the appended claims, regardless of whether they accomplish one or more of the above-mentioned needs.